BITKOM, GEMA Reach Licensing Agreement For Online Music Platforms

After nearly ten years of negotiations, a licensing agreement for Internet music platforms was reached last week between Munich-based German performance rights organization GEMA and IT industry association BITKOM, in Berlin. Internet portals now are required to pay 6 to 9 eurocents per song sold to GEMA, retroactive to January 1, 2002. BITKOM and its member companies get a discount of 20 percent. Free audio samples are extended from 30 to 90 seconds per song.

"This settlement is very welcome for the members of GEMA," its CEO Dr. Harald Heker said in a statement. "The monies placed in escrow can now be accounted according to the agreement and be paid out gradually." BITKOM put those funds in escrow at the arbitration board in Munich ten years ago.

Within BITKOM circles, it is estimated that GEMA will pay out about 40 million euro to its 64,000 members next year. GEMA and BITKOM officially refused to give any statements about the amount in escrow.

Streaming licenses are also part of the settlement agreement. Services with subscriptions have to pay between 75 cent to 1.25 euro per user and month, according to BITKOM. "This gives providers and services security in their planning," Volker Smid, Vice President in Berlin, said in a statement. "Some services that were previously successful abroad now have similar licensing conditions in Germany."

Ad-funded music services and videos as well as streaming video services are not part of the agreement and will be subject of further negotiations. Eva Kiltz, managing director of the Association of Independent Record Producers (VUT), says, "This settlement not only is important for streaming services such as Deezer and Spotify but also for us to start online offers." She adds that she hopes that the contract will also positively influence negotiations between GEMA and YouTube.

"This makes our business much easier," Thorsten Schliesche, Vice-President Sales and Marketing Europe and General Manager Napster Germany, told Billboard. "In the past we had to invest a lot of time in the individual negotiations with the different labels to secure the rights of the artists. With a music-catalogue of 17 million titles this is enormously time-consuming." Schliesche also welcomed the extension of the audio samples."We are sure that our business will be positively influenced."

"This agreement is an important step for the digital future of the German music-industry," says Gerrit Schumann, managing director at Simfy. "It will open up the market and will stimulate the business. Otherwise, the negotiations for ad-funded services have to be sped up to compete internationally."

"It was not quick, but this agreement might be a model for an agreement between GEMA and YouTube," Florian Drücke, managing director of the German Music Industry Association (BVMI).

"I do not dare to give a forecast for YouTube because the positions for a fair remuneration are too different," Dr. Mario Rehse, director intellectual property rights at BITKOM, told Billboard. German copyright owners of music works used by YouTube have received no remuneration since April 2009.

Today, streaming services are recording the greatest sales growth in the German digital market. In the first half of the 2011, sales from online subscription services such as Napster, Simfy Premium and Musicload Nonstop rose by 21.4 percent, with advertising-financed streaming services such as MyVideo and Clipfish generating 64.8 percent more sales than in the same period of the previous year. According to BVMI. Streaming services thus account for 11.5 percent of the digital market. A la carte downloads contribute the greatest proportion of 83.8 percent to the digital market.